Malaysia’s newest Ministry of Economy (MoE) was created to oversee long‐term planning and development. In practice, however, virtually all economic policy power remains elsewhere. Key financial controls lie with the Ministry of Finance (MoF) (which sets budgets and taxes), Bank Negara Malaysia (BNM, the central bank, which manages monetary policy), and the Prime Minister’s Office/Economic Planning Unit (PMO/EPU) (which coordinates national development plans).
These agencies already handle budgeting, currency, and macroeconomic strategy, leaving the MoE with largely advisory and coordination roles .
In short, critics argue the MoE has little independent power – it cannot raise revenue or print money, and many of its planning functions overlap with existing bodies.
Budgetary and fiscal control in MoF: Malaysia’s Constitution vests revenue and expenditure authority in the Finance Ministry. As one study notes, the MoF “is the custodian of Malaysia’s public finances,” coordinating and scrutinizing state budgets, development programmes, and five‐year economic plans. In effect, any major spending decisions (development allocations, value management, debt issuance, etc.) must pass through the MoF. The MoE’s mandate to “determine ceiling and distribution of development expenditure” is therefore subordinate to MoF approval.
Bank Negara’s monetary power: The central bank sets interest rates, manages currency and reserves, and oversees financial stability. By law, Bank Negara operates independently on monetary policy, meaning it can counteract or override fiscal moves. As a leading analysis explains, Malaysia’s macroeconomic policy is “coordinated by the EPU, Ministry of Finance and Bank Negara Malaysia” – with the PMO/EPU and MoF driving budget and plan decisions, and BNM steering money supply and inflation. This trilateral core leaves little scope for the MoE to alter macro trends.
Prime Minister’s Office and EPU coordination: The PMO (through the Economic Planning Unit and inter-agency councils) effectively manages national development strategy. The EPU “plays a central role in managing the national economy and in overseeing national economic policies” (including key programs like the New Economic Policy and Malaysia Plans). It sets policy standards, prepares development budgets, and advises the government on economic issues. The Cabinet Secretary (chief of PMO) likewise “coordinates the policies of the various ministries and ensures that Cabinet decisions are implemented” . In short, the Prime Minister and his Planning Unit already coordinate cross‐ministry economic policy and serve as the “national secretariat” for economic action.
Given this structure, the MoE has limited authority in practice.
Its published functions – socioeconomic planning, coordinating inclusive development (Bumiputera agenda), and monitoring projects – overlap with the PMO/EPU, state governments, and line ministries (e.g. Agriculture, Energy, Social Services also fall under MoE’s umbrella).
The MoE can formulate plans and conduct research, but it cannot independently allocate revenue or enforce policy. Some analysts argue this makes the ministry largely symbolic or duplicative. As one government briefing notes of Malaysia’s institutional setup, “the Federal Government has authority over macroeconomic policies,” and these are already coordinated by the EPU, MoF and BNM – not by a new economy ministry.
Budgets stay with Finance: No matter how good a plan the MoE draws up, it must still pass through the Finance Ministry. If MoF priorities differ (for example, reallocating funds to debt service or subsidies), the MoE cannot override that. The MoE does not prepare the national budget; it only influences the development portion of it. As one academic analysis notes, even state governments’ “five-yearly economic policy” must be scrutinized by the MoF and EPU . Thus the ultimate allocation of resources is not within MoE control.
Economic levers remain external: Key decisions like adjusting interest rates or currency policy are set by Bank Negara, not by the MoE. External shocks (oil prices, global markets) are handled by central bank interventions and fiscal stimulus packages, again crafted by BNM and the MoF. The MoE’s role in such crises would only be advisory.
Overlap with PMO/EPU limits novelty: Many initiatives the MoE might claim – like poverty reduction or industrial development – are already embedded in the Malaysia Plan and other established frameworks. For instance, the EPU has traditionally coordinated broad socio-economic targets and major infrastructure projects. The PM’s office chairs national councils and has the final say on policy across ministries. In effect, the MoE often implements directives from those bodies rather than setting independent strategy.
Real-world evidence: If the MoE had strong independent clout, we would expect to see it prominently influencing policy outcomes. Instead, news reports show it mostly working with others (for example, co-chairing oversight teams with the anti-corruption agency to monitor allocations) – a coordination role rather than a decision-making one. Meanwhile, major policy speeches (e.g. budget announcements, foreign investment treaties) still come from the Finance Minister or Prime Minister, not the Economy Minister.
In sum, while a Ministry of Economy can claim a broad mission statement, the levers of power remain firmly with Malaysia’s long-established institutions. Without budget autonomy or monetary authority, the MoE’s initiatives must be approved and supported by MoF, BNM, and the PMO.
This reinforces the critique that the ministry is largely superfluous as an independent actor, rather than a fourth pillar of economic power.
The debate over Malaysia’s Ministry of Economy hinges on who really holds economic power.
In practice, the Ministry of Finance, Bank Negara Malaysia, and the Prime Minister’s Office have overwhelming control over fiscal and monetary policy.
The new Ministry of Economy, by contrast, primarily advises and monitors development initiatives – tasks already covered by other agencies or political offices. While a dedicated ministry can in theory bring focus to broad socioeconomic goals, its creation risks adding bureaucracy without new capability.
India’s recent reforms illustrate an alternative path: it repurposed planning bodies into a central think-tank and emphasized coordination from the Prime Minister’s office, rather than proliferating ministries. Malaysia could learn from this by consolidating economic functions into well-defined entities, ensuring clear budgets and mandates.
A leaner, more coordinated structure – where roles and powers are transparent – would likely serve Malaysia’s growth objectives better than maintaining a de jure Ministry of Economy whose de facto clout is limited.
Source : Murray Hunter
The Coverage Malaysia
